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Bail-in & the Financial Stability Board

On December 11, 2014, the US House passed a bill repealing the Dodd-Frank requirement that risky derivatives be pushed into big-bank subsidiaries, leaving our deposits and pensions exposed to massive derivatives losses.

The bill was vigorously challenged by Senator Elizabeth Warren; but the tide turned when Jamie Dimon, CEO of JPMorganChase, stepped into the ring. Perhaps what prompted his intervention was the unanticipated $40 drop in the price of oil. As financial blogger Michael Snyder points out, that drop could trigger a derivatives payout that could bankrupt the biggest banks. And if the G20’s new “bail-in” rules are formalized, depositors and pensioners could be on the hook.

The new bail-in rules were discussed in my last post. They are edicts of the Financial Stability Board (FSB), an unelected body of central bankers and finance ministers headquartered in the Bank for International Settlements in Basel, Switzerland. Where did the FSB get these sweeping powers, and is its mandate legally enforceable?
Those questions were addressed in an article I wrote in June 2009, two months after the FSB was formed, titled “Big Brother in Basel: BIS Financial Stability Board Undermines National Sovereignty.” It linked the strange boot shape of the BIS to a line from Orwell’s 1984: “a boot stamping on a human face—forever.” The concerns raised there seem to be materializing, so I’m republishing the bulk of that article. We need to be paying attention, lest the bail-in juggernaut steamroll over us unchallenged…

Disclaimer

The viewpoints and opinions expressed do not take into account any particular individual's investment objectives, financial situation, political agendas or religious beliefs. My views shared are my own which are derived from my personal experiences and influences and I am free to change them at any time, or realign to accommodate any new conditions and information available. I cannot guarantee the information to be free of mistakes and incorrect interpretations. Any financial topics must not be taken as advice and past performance is not indicative of future results. The information, including commentary, investment ideas, legal, tax and other specialised subjects, should not be relied upon as a substitute for independent professional consultation, which should always be explored before making any financial or legal decisions.